Black Hills Corp. acquires SourceGas and sells stake in IPP

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Black Hills Corp. acquires SourceGas and sells stake in IPP

Black Hills Corporation has recently announced it has completed the purchase of SourceGas Holdings LLC, a natural gas utility serving approximately 429,000 customers in Arkansas, Colorado, Nebraska and Wyoming, and a 512-mile regulated intrastate natural gas transmission pipeline in Colorado.

Black Hills Corporation currently serves more than 1.2 million natural gas and electric utility customers in nearly 800 communities in eight Rocky Mountain and Midcontinent states. 

Black Hills Corporation acquired SourceGas from investment funds managed by Alinda Capital Partners and GE Energy Financial Services, a GE Unit, for total consideration of approximately US$1.89 billion, including assumption of US$760 million of debt.

The transaction was financed by equity common shares and equity units issued Nov. 23, 2015, a debt offering completed Jan. 13, 2016, and short-term borrowings. 

David R. Emery, chairman and CEO of Black Hills Corp, said:

"This acquisition is an important milestone in our strategic growth plan. It increases our utility customer count by 55 percent and complements the company's existing businesses. We look forward to building upon our company's 130-year history to serve our new natural gas utility customers."

On the other hand, Black Hills Corporation has announced that its non-regulated subsidiary Black Hills Electric Generation, LLC signed a definitive agreement to sell a 49.9% member equity interest in Black Hills Colorado IPP for US$215 million to AIA Energy North America LLC, an infrastructure investment platform managed by Argo Infrastructure Partners.

Black Hills Colorado IPP owns and operates a 200 MW, combined-cycle natural gas generating facility located in Pueblo, Colorado.

Black Hills will continue to be the majority owner and operator of the facility, which is contracted to provide capacity and energy through 2031 to Black Hills' electric utility in Colorado.

David R. Emery commented:

"This sale highlights our ability to effectively manage our assets to support our long-term utility growth strategy.The combination of a high-quality asset and strong market interest for assets of this type led to an attractive valuation for our shareholders and allows us to continue to support reliable service for our utilities. We look forward to a long-term relationship with Argo, a team of experienced infrastructure investment professionals. The proceeds provide an alternative to additional debt and equity financing that would otherwise be required to fund projected capital spending, therefore we expect the sale to be slightly accretive to earnings in 2016 and 2017."

Credit Suisse served as exclusive financial advisor to Black Hills on the sale of Black Hills Colorado IPP as well as on the acquisition of SourceGas. Serving as legal counsel to Black Hills were Faegre Baker Daniels LLP on the acquisition of SourceGas and Husch Blackwell LLP on the Black Hills Colorado IPP transaction.

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